Asymmetric effect of FEARS Sentiment on Stock Returns: Short-sale constraints, limits to arbitrage, and behavioural biases

Garima Goel, Saumya Ranjan Dash, Robert Brooks and Sowmya Subramaniam

Emerging Markets Finance and Trade, 2022, vol. 58, issue 11, 3119-3135

Abstract: This paper examines the implications of short-sale constraints, limits to arbitrage, and behavioral biases on the FEARS sentiment and stock returns asymmetric relationship. Our results indicate a strong negative relationship between FEARS sentiment and stock return. Our findings show that short-sell and arbitrage constraint attenuates the potential impact of sentiment on return behavior. We find that the FEARS sentiment influences behavioral biases and the trading activity of market participants.

Date: 2022
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DOI: 10.1080/1540496X.2022.2028618

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